U.S. tech stocks faced a sharp decline on Monday after Chinese startup DeepSeek unveiled its latest artificial intelligence model, Janus-Pro-7B, which reportedly surpasses OpenAI’s DALL-E 3 in performance benchmarks. The Hangzhou-based company’s advancements have prompted investors to reassess the economic implications of rapidly progressing AI technologies from the Chinese mainland.
DeepSeek announced that its new image generator utilizes 72 million synthetic images to achieve significant improvements in multimodal understanding and text-to-image capabilities. Additionally, the company’s assistant app has overtaken ChatGPT in U.S. App Store downloads, highlighting its growing influence in consumer AI applications.
The announcement triggered a sell-off in U.S. tech stocks, with market giants experiencing substantial losses. Nvidia led the downturn, plunging nearly 17 percent and erasing almost $600 billion in market value—the largest single-day loss in Wall Street history. The Nasdaq Composite fell 3.1 percent, while the Philadelphia Semiconductor Index dropped 9.2 percent, marking its worst day since March 2020. Other companies like Oracle, Broadcom, and data center firm Vertiv Holdings saw declines exceeding 13 percent.
Analysts warn that the sell-off underscores deeper vulnerabilities in the tech sector, such as high valuations, concerns over exaggerated infrastructure spending, and signs that U.S. chip export controls may not be hindering AI advancements in the Chinese mainland as intended.
“If DeepSeek truly has a ‘better mousetrap,’ it could disrupt the entire AI narrative that has propelled markets over the last two years,” said Brian Jacobsen of Annex Wealth Management. “This could mean reduced demand for chips, less need for massive power production to fuel the models, and a diminished requirement for large-scale data centers.”
The developments have sparked strategic concerns about the future of AI technology and competitiveness. Venture capitalist Marc Andreessen referred to DeepSeek’s rise as a “Sputnik moment,” drawing parallels to the Soviet Union’s satellite launch that ignited the space race. Former U.S. President Donald Trump labeled DeepSeek a “wake-up call” for U.S. competitiveness.
Founded in 2023 by quant trading veteran Liang Wenfeng, DeepSeek has rapidly gained recognition for its open-source approach and ability to amass computing resources. The company’s progress has become a case study in innovation despite international challenges.
While some investors view the market reaction as an overstatement, others see it as an indication of shifting dynamics in the global technology landscape. Daniel Morgan, senior portfolio manager at Synovus Trust Company, which owns nearly a million Nvidia shares, suggested that the concerns might be exaggerated, noting that DeepSeek’s AI model is designed for mobile phones and PCs rather than data centers, where substantial profits are generated.
The episode highlights the evolving nature of AI development and the competitive pressures between global tech industries. As DeepSeek continues to push boundaries, the tech world watches closely to see how these advancements will shape the future.
Reference(s):
cgtn.com
